A district-level protest has been planned by KASSIA against the recently announced power tariff hike of ₹2.89 per unit for June, coupled with the anticipation of further hikes in the upcoming months.
The affiliated industry associations will present a memorandum to the local district commissioner, hold a protest rally at the DC office, and warn that if no action is forthcoming from the government, KASSIA will consider issuing a strike call to all the MSMEs in the state as a last resort.
The recent power tariff hike of ₹2.89 per unit for June, coupled with the anticipation of further hikes in the upcoming months, will severely burden micro and small enterprises, warns the president of KASSIA, K. N. Narasimhamurthy.
This substantial increase in tariff has the potential to significantly impact these businesses, potentially leading to adverse consequences, he added. As previously reported, the hikes are expected to be followed by raise in property tax and guidance value, severely dwindling the profit margin of small enterprises, it added.
Hit in profitability
“The profitability of the MSEs is declining due to stiff competition, and the small enterprises cannot pass on the burden to their customers as they lack the branding power of big players who can increase prices proportionately to the tariff hike and without losing customers or market share. These challenges will be further intensified if the high-power tariff is increased,” the association said at a meeting in the city.
For instance, a manufacturing unit paying a monthly bill of ₹1 lakh will end up paying 30 per cent more, that is, ₹30,000, solely on account of the power charges.
Moreover, the association added that the government’s move, which is aimed at increasing its revenue by raising the power rate, may actually yield little at best. “This is because many industrial consumers, who constitute the major chunk of the revenue, are moving away from the ESCOMS to the third-party grid and open access and captive power from private power supply companies for their requirements,” it noted.
According to the estimates by energy experts, both the number of units used and the number of consumers in the manufacturing sector are decreasing in percentage terms. Already, the revenue from this sector has dropped from 25 per cent to 14 per cent.
There are around 5.65 lakh MSMEs consuming 2,238 million units of power. The power consumption of MSMEs accounts for around 3.51 per cent. They employ 8 per cent manpower per unit of power consumed and, in the aggregate, provide employment to around 40 lakh people. Assuming four people per family, the number of individuals affected by such high tariff hikes in the extended MSME fraternity dependent on the industry is around 1.6 crore.
In addition to the rising energy cost, the industry has to bear the brunt of a lack of quality and reliable power, especially in rural areas where the situation in industrial estates is extremely poor.
“We feel that transferring the arrears retained by the local government bodies and the subsidy retained by the government, amounting to ₹ 11,000 crore, to ESCOMS will help ESCOMS them in avoiding loans and paying more interest. This, in turn, will reduce the burden on consumers,” stated the president.
If the high tariff regime continues in the state, the industry, particularly the micro and small-scale entrepreneurs, will have no recourse other than to either consider shutting down their industry or shifting to neighbouring states where the tariff cost is cheaper.